FINRA Orders Morgan Stanley to Pay $2.4M for Excessive Trading

FINRA Orders Morgan Stanley to Pay $2.4M for Excessive Trading

Here we go again. Responding to the latest round of claims against former Morgan Stanley broker Steven Mark Wyatt, a Financial Industry Regulatory Authority Inc. (FINRA) arbitration panel recently ordered Morgan Stanley to pay at least $2.4 million for unauthorized and excessive trading in the stock market during and after the 2008 financial crisis.

Back in 2012, Wyatt was let go from the Ridgeland, Miss., Morgan Stanley brokerage office. But his actions continue to be the subject of cases against the brokerage firm.

Excessive Trading

A group of physicians and their family members were awarded the $2.4 million judgment after accusing Wyatt of excessive stock market trading in 2008, which they claim cost them money.

Excessive trading, or churning, relates to a broker frequently buying and selling a client’s securities, generating commissions but doing little to meet the client’s investment objectives.

Unauthorized Trading

The lawsuit claims that Wyatt purchased thinly-traded stocks for his clients that he himself owned. He also made speculative (high risk) investments in exchange-traded funds.

Exchange-traded funds are marketable securities that track an index (such as bonds or a commodity) or a group of assets like an index fund.

Broker Trading Malpractice

This is the latest in a string of cases involving Wyatt. Four previous cases have been resolved without an admission of guilt. Wyatt has been found liable in two additional cases, and two more cases are pending.

Discharged from Morgan Stanley in 2012, Wyatt hasn’t worked as a U.S.-registered broker since, according to his BrokerCheck report.

Joseph C. Peiffer, the attorney representing the physician’s, claims that the cases against Wyatt reflect failures at every level of leadership. He says Morgan Stanley failed to see warning signs, including unauthorized trading.

Aggressive Trading Growth Strategy?

Margaret G. Draper, a spokeswoman for New York-based Morgan Stanley, said in a statement that the company respectfully disagrees with the arbitrator’s’ decision.

She claims that the investors who brought the claim were experienced, and that they only received a portion of the damages they claimed to have incurred in pursuing an aggressive growth strategy during the period in question.

The claim asked for $4.43 million plus interest, fees and other costs, and Morgan Stanley was ordered to pay the $2.4 million judgement plus fees and interest.

The team of investment fraud lawyers at Starr Austen & Miller LLP fights for the protection of investors and handles cases involving securities arbitration misrepresentation, overconcentration, broker fraud, negligence and breach of trust.

Source: Investment News